Taboola's Twin Headwinds Meet AI Tailwinds: Google Deprecates a Product, but the Company Raises ex-TAC Guidance and Lands FOX News
Q2 2026 beats ex-TAC gross profit despite Explore More deprecation and publisher cleanup; strategic wins and Deeper Dive momentum signal a durable path.
TBLA · Earnings Call · 2026-08-05
The Google Policy Shock
Taboola's second-quarter headline was a beat: ex-TAC gross profit rose 12% year-over-year, and the company raised full-year guidance. But the market still knocked the stock down over 30% from its July peak, and it's easy to see why. The quarter carried two self-inflicted wounds. First, Google deprecated the Explore More product, a high-margin placement that lets users see additional sponsored content after clicking the back button. CFO Stephen Walker quantified the damage:CEO Adam Singolda explained that Google moved faster than the industry expected, but the company has already launched a replacement product, Engage, to recapture some of that revenue. The Google policy change and the deprecation of Explore are now baked into guidance, and Taboola is betting that a new product will claw back a meaningful portion. As Singolda put it, “We did come up with a new product, Engage, which is basically aiming to capture a lot of that revenue back.” — Adam Singolda, Founder and CEO · 2026-08-05In terms of your question, that $20 million -- over $20 million in the second half, that was ex-TAC.
Cleaning the Publisher Network
The second headwind was a deliberate pruning of low-quality supply, mostly international publishers, with a heavy concentration in the Greater China region. Steve Walker characterized this as "an unusual quarter in terms of the volume" and argued it will improve long-term advertiser success. “Generally speaking, that's a short-term hit, long-term gain.” — Stephen Walker, CFO · 2026-08-05 The network cleanup and the removal of international publishers reduced revenue and put pressure on average revenue per scaled advertiser, but the company believes it will lead to stronger advertiser performance and higher yields down the line. Walker also clarified that almost none of the cleaned-up inventory was under minimum guarantees, which are reserved for premium brands. That leaves room for the company to continue shifting toward higher-margin, higher-quality supply.Strategic Wins and AI Momentum
While the quarter was noisy, the strategic wins were anything but incremental. Taboola announced a first-of-its-kind expansion with a major existing publisher—moving from native-only placements to full-page monetization including display and vertical formats. Adam Singolda noted, “It's more about ... the industry with publishers basically wanting to have less partners, deeper relationships, less cost, less complexity and more revenue.” — Adam Singolda, Founder and CEO · 2026-08-05 This validates the strategy of expanding beyond native into the far larger display market, and it's a template for other publishers. The company also signed FOX News, one of the top-5 U.S. publishers, extending its relationship with the FOX ecosystem. These are strategic wins that demonstrate the ability to land premium publishers and to monetize more of their inventory. AI remains the longer game. Realize Plus, the AI-powered campaign optimizer modeled on Google Performance Max, now has more than 300 advertisers in beta. Adam compared it to the early days of search ads: “The gap between traditional kind of Taboola monetization, which is great, to what we're doing on deeper dive is quite significant.” — Adam Singolda, Founder and CEO · 2026-08-05 That deeper dive product is crossing 10 million users, and CPMs are running 5–10x higher than traditional placements. The company also launched an MCP and cloud integration that lets advertisers plan campaigns through natural language with AI. These bets echo the prior quarter's optimism—when Singolda promised that Realize+ could “open for advertisers dozens, hundreds and sometimes thousands of campaigns for you on a daily basis.” — Adam Singolda, Founder and CEO · 2026-05-06 At the same time, the company is working to keep AI costs in check; as Steve noted in May, “In many cases, we're hosting our own AI.” — Stephen Walker, CFO · 2026-05-06Financial Discipline and Market Reaction
Taboola continues to convert EBITDA into free cash flow and to return the majority to shareholders. In Q2 it repurchased 9.4 million shares for $41.4 million, bringing cumulative buybacks to roughly 20% of shares outstanding since the start of 2025. Free cash flow reached $76 million in Q1 2026, and the company reiterated its 60–70% conversion target. CFO Walker also reaffirmed the expected ex-TAC margin range:Despite the raised guidance, the stock drew down 33% from its July high in just five weeks, a reflection of lingering concerns about Google dependency and the macro backdrop. But Taboola's raised ex-TAC guide—which already absorbs the Explore More hit—and the pipeline of strategic wins suggest the company is building a more diversified, higher-quality business. The market may be underappreciating the pace at which AI products can shift the mix.I think we've been in the kind of 35% to 40% ex-TAC margin range for a while. I think that is a good expectation for investors to have going forward.